McDonald's faces a critical moment Monday that could determine its fate

A McDonald's 10-piece chicken McNuggets box is photographed at the Times Square location in New York. Thomson Reuters

LOS ANGELES (Reuters) - McDonald's new Chief Executive Steve Easterbrook is set to unveil his plan on Monday to revive growth as the world's largest hamburger chain struggles to win back consumers and investors.

He'll be aiming to persuade people such as Janna Sampson, co-chief investment officer at OakBrook Investments, which bought McDonald's shares on the cheap more than a decade ago and eventually held more than 7 million shares as the company spiffed up its restaurants, improved service and expanded its menus with things like fancy coffee, salads, and wrap sandwiches.

But Sampson's enthusiasm waned a couple of years ago as quarterly sales at established restaurants started to flag and then fall. In March 2014, OakBrook sold most of its holdings, figuring that McDonald's stock price was too high for a company with no clear strategy for turning its fortunes around.

"It had not come down enough given the kinds of sales numbers we were seeing," said Sampson. The firm favors companies that dominate their industries, as McDonald's still does.

Easterbrook has described himself as an "internal activist" willing to challenge the status quo to remake McDonald's as a "modern, progressive burger company."

Most financial analysts who cover McDonald's are on the sidelines. Twenty have "hold" ratings on the stock, one is at "sell," and seven are at "buy" or higher, according to Thomson Reuters data.

They expect Easterbrook to outline more corporate cost cuts, sales of restaurants to franchisees and steps to simplify its menu. He may also elaborate on plans to experiment with customized sandwiches and new mobile technologies. Among options traders, bullish bets on McDonald's turnaround plan picked up last week.

Some analysts said Easterbrook has what it takes to overcome McDonald's challenges.

"Management is doing what it can to fix them," JPMorgan analyst John Ivankoe, who has an "overweight" rating on McDonald's shares, wrote in a recent note. "This is obviously a turnaround that will take time."

Other industry experts say the company needs to address what some franchisees have called an identity crisis rooted in its desire to be all things to all people. Rivals such as Wendy's Co, which has wooed hard-core fast-food fans with more indulgent dishes, and Chipotle Mexican Grill Inc, which has catered to customers seeking healthier fare, have been far more successful at adapting to changing tastes.

"They need a long-term concept and a brand make-over," said Gary Shamis, a leader in the restaurant practice at accounting firm BDO. "The entire dining spectrum has gone through a revolution," said Shamis, who personally owned McDonald's shares for 18 years before selling in late 2014. "It's a different world today."

Last year, when McDonald's net income tumbled 15%, was one of the worst in company history. The company's stock now has one of the lowest price-to-earnings ratios in the fast-food sector at about 20 times 2015 estimated earnings.

That's still too rich for Sampson, who said her firm bought into McDonald's at a P/E of nine in 2003 and would need it to be below 15 to give the stock a serious look. "It will take time for changes to be implemented and for customers to recognize those changes," said Morningstar restaurant analyst R.J. Hottovy. "At this point, it's a 'show me' story for McDonald's."

(Reporting by Lisa Baertlein and Nayan Das in Bengaluru. Editing by Michele Gershberg and John Pickering)